Thompson v Thompson
[2015] NZHC 2241
•17 September 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2012-404-7668 [2015] NZHC 2241
BETWEEN CHRISTINE HAMILTON THOMPSON
Plaintiff
AND
MICHAEL LEITH THOMPSON First Defendant
BRUCE KENNETH DELL Second Defendant
MICHAEL LEITH THOMPSON, DEAN ALAN ELLWOOD and BRUCE KENNETH DELL
Third Defendants
Hearing: (on the papers) Counsel
S Ambler for plaintiff
D A T Chambers QC for first defendant P Fee and L Fraser for second defendant P Tesiram for third defendants
Judgment:
17 September 2015
JUDGMENT OF ANDREWS J [Costs]
This judgment was delivered by me on 17 September 2015 at 11 am pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
CHRISTINE HAMILTON THOMPSON v MICHAEL LEITH THOMPSON [2015] NZHC 2241 [17 September
2015]
Introduction
[1] The plaintiff discontinued this proceeding on 1 July 2015. The first and second defendants seek costs on the discontinuance, pursuant to r 15.23: the first defendant in the sum of $7960 together with disbursements of $608.80 and the second defendant in the sum of $6567 together with disbursements of $608.80.
[2] The plaintiff contends that costs should lie where they fall or, if an order is made that the plaintiff is to pay costs, only one order should be made and it should be for a reduced amount.
Background
[3] After a marriage of some 31 years the plaintiff and the first defendant separated in 2002. The marriage was dissolved in 2005. In 2006, the plaintiff issued proceedings in the Family Court seeking division of relationship property. The focus of the Family Court proceeding was a payment of $8 million made to the first defendant for a restraint of trade covenant upon the sale of a business. The plaintiff contended that the payment was relationship property and the first defendant contended that it was not.
[4] This proceeding was issued by the plaintiff on 20 December 2012. Again, the focus of the proceeding is the restraint of trade payment. The statement of claim referred to the Family Court proceeding, and recorded that a reserved judgment was awaited. The plaintiff alleged that the first, second and third defendants were in breach of fiduciary duties owed to her in respect of the sale of the business and the restraint of trade covenant, and that the second defendant was also in breach of a duty of care.
[5] Statements of defence were filed on 4 March 2013 (first defendant), 8 March
2013 (third defendants) and 25 March 2013 (second defendant).
[6] The first case management conference was scheduled for 20 June 2013. By a consent memorandum of counsel dated 11 June 2013, counsel for all parties noted that the Family Court decision had been delivered on 24 April 2013, and the plaintiff
had indicated she would appeal. Counsel sought a stay of the proceeding pending expiry of the appeal period, determination of any appeal (or further appeal), order of the High Court, or agreement between the parties. Cooper J did not grant a stay, and required counsel to file a further memorandum.
[7] The appeal against the Family Court decision was heard in this Court on
1 and 2 August 2013. By a consent memorandum dated 2 August 2013, counsel sought an adjournment of the initial case management conference in this proceeding to a date no later than two weeks after this Court’s decision on the appeal.
[8] This Court’s judgment on the appeal from the Family Court was delivered on
30 August 2013. There were subsequent appeals to the Court of Appeal and the Supreme Court, with the Supreme Court delivering judgment on 13 March 2015. The Supreme Court held that the retention of title payment was relationship property.
[9] Throughout, this Court has adjourned this proceeding pending the outcome of the appeals. It has been recorded in memoranda filed on behalf of the plaintiff that the proceeding might be discontinued, depending on the ultimate outcome of the Family Court proceeding.
[10] Following delivery of the Supreme Court’s judgment, the plaintiff filed a memorandum in the Family Court on 15 April 2015, seeking an order that the first defendant pay her $4 million (being a half share of the retention of title payment) together with interest under the Judicature Act. In a memorandum filed in this proceeding on 11 May 2015, counsel for the plaintiff advised that the first defendant had on 1 May 2015 filed an application in the Family Court seeking an unequal sharing of the retention of title payment. It was stated that in light of that application, the plaintiff did not wish to discontinue this proceeding, and a further adjournment was sought.
[11] The first and third defendants opposed a further adjournment. On 12 June
2015 they filed a joint application to strike-out this proceeding on the grounds that the retention of title payment is now governed by orders to be made by the Family Court under the Property (Relationships) Act 1976, and that this proceeding is
therefore an abuse of process. On 26 June 2015, counsel for the second defendant filed an application to strike-out the proceeding on substantially the same grounds.
Submissions
[12] Other than to set out the claim for costs, counsel for the first and second defendants did not make any submissions as to costs. Counsel for the second defendant subsequently filed a memorandum in reply to the plaintiff’s memorandum. The third defendants have not claimed costs.
[13] On behalf of the plaintiff, it is submitted that the circumstances of this case make it unjust and inequitable to award costs against her. It is submitted that the plaintiff’s situation is analogous to a plaintiff who pursues, in a single proceeding, alternative causes of action seeking relief in respect of the same underlying mischief. The only difference in the present case is that different courts had jurisdiction in respect of the plaintiff’s primary claim (that the retention of title payment was relationship property) and her secondary alternative claims for relief. The plaintiff submits that (as would be the case if there were multiple causes of action in a single proceeding) having been successful on the primary cause of action, so that it is unnecessary for a court to rule on the alternative claims, the plaintiff should not face a claim for costs from the unsuccessful defendants in relation to the alternative claims.
[14] It was further submitted that as a result of the first defendant’s recent claim for unequal sharing of the restraint of trade payment, the plaintiff asked this Court to adjourn the proceeding so that she could preserve her alternative avenues for relief until the final outcome in the Family Court was known. In response to that request, the defendants took an unnecessarily aggressive approach by filing strike-out applications. The plaintiff submitted that there was no need for the defendants to take that step, as there were no cost implications or prejudice to the defendants arising out of a further adjournment.
[15] Accordingly, the plaintiff seeks an order that costs lie where they fall. However, if the Court were minded to award costs against the plaintiff, it is submitted that only one set of costs should be ordered, as the first and second
defendants costs duplicate each other, both having filed a Statement of Defence, memorandum in reply to the plaintiff ’s request for an adjournment and an application to strike-out. Further, the plaintiff submits that the costs claims are excessive in that the time taken to complete particular tasks would have been less than that allowed under the scale. A further ground for seeking a reduced order is that the strike-out applications were an aggressive and unnecessary response.
[16] In reply, the second defendant submits that while in the Family Court proceeding he is named only in his capacity as trustee of the M L Thompson Family Trust, he is named in this proceeding personally, in his capacity as a solicitor. He submits that the plaintiff has questioned his actions as a professional and adviser of the plaintiff, and these serious allegations are wholly different from those against the first and third defendants, and required a considered and detailed defence to be filed. According, he submits, the allegations against him cannot be considered to be analogous to alternative causes of action in a single proceeding seeking relief in respect of the same underlying mischief.
[17] The second defendant further submits that the plaintiff’s continuation of this proceeding after the Supreme Court delivered its judgment in the Family Court proceeding (by which the plaintiff received the outcome she desired) amounted to an abuse of process, so it was appropriate for him to apply for this proceeding to be struck out.
Analysis
[18] The starting point with regard to costs is that they are at the discretion of the
Court.1 The discretion is not unfettered, and must be exercised judicially.2
Generally, the party who fails should pay costs to the party who succeeds.3
[19] Rule 15.23 provides, as to costs on a discontinuance:
Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs
1 High Court Rules, r 14.1.
2 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7] and
[16].
3 High Court Rules, r 14.2(1).
to the defendant of and incidental to the proceeding up to and including the discontinuance.
[20] There is a presumption in favour of an award of costs to the defendant, and the onus is on the plaintiff to satisfy the court that, because of the particular relevant circumstances of the case, that presumption should not apply.4 The authors of McGechan on Procedure summarise the relevant principles as follows:5
(a) Although the r 15.23 presumption is designed to give a certain and predictable outcome upon discontinuance, it may be displaced if the Court finds there are circumstances which make it just and equitable that it should not apply.
(b) Although the Court is not limited in the factors it may take into account when considering whether the presumption is displaced, generally:
(i) The Court will not consider the merits of the respective cases, unless they are so obvious that they should influence the costs outcome.
(ii) The Court will consider the reasonableness of the stance of both parties: whether it was reasonable for the plaintiff to bring and continue the proceeding, and for the defendant to oppose the proceeding up to the point of discontinuance.
(iii) Conduct prior to the commencement of the proceeding may be relevant (for example, if any conduct by a defendant precipitated the litigation), as may be the reason for discontinuing (for example, a change of circumstances rendering the proceeding unnecessary).
(c) The Court’s general discretion in r 14.1 as to costs can also override the general principles relating to discontinuance.
[21] Despite the accepted principle that the merits of the respective cases will not generally be considered in an application for costs after a discontinuance, it is apparent that r 15.23 is intended to give effect to the principle that costs should follow the event. In his judgment for the Court of Appeal in Powell v Hally Labels Ltd Miller J observed that “The rule’s rationale is that discontinuance is ordinarily
tantamount to judgment for the defendant.”6
4 See North Shore City Council v Local Government Commission (1995) 9 PRNZ 182 (HC) at 185 and FM Custodians Ltd v Pati [2012] NZHC 1902.
5 McGechan on Procedure (online looseleaf ed) at [HR 15.23.01], citing Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973 and FM Custodians Ltd, above n
1 at [10]–[12].
6 Powell v Hally Labels Ltd [2014] NZCA 572 at [24].
[22] Yet it is not always the case that costs will be ordered against a discontinuing plaintiff. In Kroma Colour Prints, the Court of Appeal considered it necessary to consider the history of the litigation as a whole in order to determine the reasonableness of the parties’ respective stances.7 In that case, the fact that the respondent (Tridonicatco) had taken a number of steps in the litigation designed to benefit an associated company and that company’s insurers, but of no benefit to
Tridonicatco, was sufficient to displace the presumption that costs were payable by the plaintiff (Kroma) when Kroma discontinued the proceeding. In that case, the Court ordered that costs lie where they fell.
[23] In Powell v Hally Labels, the respondent had succeeded in parallel proceedings in the Employment Court, and had discontinued proceedings in the High Court. While the Court of Appeal rejected a submission that the two sets of proceedings were sufficiently intertwined such that the respondent was the successful party overall, the Court did not reject the principle of parallel proceedings justifying a conclusion as to overall success as between the parties.
[24] I conclude that a successful party will not be penalised for pursuing parallel proceedings for a legitimate purpose, provided that party acts reasonably in the proceedings. The principle will not apply where the link between the proceedings is tenuous, or where the party acts unreasonably in some way.
[25] Turning then to the present case, I accept that Ms Thompson’s claim in this Court was reasonably necessary to preserve her position with respect to the Limitation Act 2010. I also accept that once her position was preserved by the filing of a statement of claim, Ms Thompson acted reasonably in allowing the proceeding to be adjourned until the Family Court proceeding was at an end. There can also be no suggestion that her claims were otherwise than reasonable and legitimate, a fact confirmed in part by her success in the Supreme Court.
[26] However, I have also concluded that a distinction must be made between the costs claims by the first and second defendants.
7 Kroma Colour Prints Ltd v Tridonicatco NZ Ltd above n 5 at [26]–[30].
[27] In relation to the first defendant, while there is some similarity between what occurred here and cases where a plaintiff claims relief under more than one cause of action in a single proceeding, the analogy is not as close as the plaintiff submits. There have been proceedings filed in two separate jurisdictions, and they have required separate responses. I am not persuaded that there is anything in the first defendant’s statement of defence, or his agreement to successive adjournments, that raises concerns of the kind that led the Court of Appeal in Kroma Colour Prints to conclude that the presumption in favour of a costs order against the plaintiff has been displaced.
[28] However, requiring Ms Thompson to pay costs on the discontinuance would be effectively to punish her for pursing a reasonable litigation strategy, despite being the overall successful party.
[29] In the case of the first defendant, I have therefore concluded that costs should lie where they fall.
[30] The second defendant’s position is different, as he had a cause of action in negligence alleged against him that was not alleged against the other defendants, and it was independent of the allegations in the Family Court proceeding. I accept that this required an independent response, and that the discontinuance against the second defendant is tantamount to judgment against the plaintiff in favour first defendant on this matter.
[31] I direct that the plaintiff pay costs to the second defendant in respect of all steps prior to the strike out application; that is in the sum of $5,373, together with the filing fee for the statement of defence ($108.80). However, I am not persuaded that the plaintiff should pay costs in relation to the second defendant’s application to strike out. I accept the plaintiff’s submission that that application was aggressive, unnecessary, and unreasonable. In relation to that application, costs are to lie where they fall.
Result
[32] The plaintiff is ordered to pay costs to the second defendant of $5,373, together with the filing fee for the statement of defence ($108.80). Except as
specified, costs are to lie where they fall.
Andrews J
Solicitors:
Tompkins Wake, Hamilton (Plaintiff)Turner Hopkins, Auckland (first Defendant) Fee Langstone (Second Defendant)
TGT Legal, Auckland (Third Defendants)
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